Are Shih Tzus family-friendly dogs?

They can be. Shih Tzus are great family dogs just as long as any kids in the family are old enough to know that the dog is a living being with it's own feelings, not a moving barking toy. Shih Tzus can also be a bit nippy with kids if they aren't used to them. Most good breeders make sure their dogs get in some experience with kids of various ages before selling them.